New Census Calculation Finds Higher Rate of Poverty in U.S.

WASHINGTON (CBS) -- The ranks of America's poor edged up last year to a high of 49.7 million, based on a new census measure that takes into account medical costs and work-related expenses.

The numbers released Wednesday by the Census Bureau are part of a newly developed supplemental poverty measure. Devised a year ago, this measure provides a fuller picture of poverty that the government believes an be used to assess safety-net programs by factoring in living expenses and taxpayer-provided benefits that the official formula leaves out.

Based on the revised formula, the number of poor people exceeded the 49 million, or 16 percent of the population, who were living below the poverty line in 2010. That came as more people in the slowly improving economy picked up low-wage jobs last year but still struggled to pay living expenses. The revised poverty rate of 16.1 percent also is higher than the record 46.2 million, or 15 percent, that the government's official estimate reported in September.

Due to medical expenses, higher living costs and limited immigrant access to government programs, people 65 or older, Hispanics and urbanites were more likely to be struggling economically than the alternative formula. Also spiking higher in 2011 was poverty among full-time and part-time workers.

As a result, the portrait of poverty broken down by state notably changes. California tops the list, hurt by high housing costs, large numbers of immigrants as well as less generous tax credits and food stamp programs to buoy low-income families. It is followed by the District of Columbia, Arizona, Florida and Georgia.

In the official census tally, it was rural states that were more likely to be near the top of the list, led by Mississippi, New Mexico, Arizona and Louisiana.

"We're seeing a very slow recovery, with increases in poverty among workers due to more new jobs which are low-wage," said Timothy Smeeding, a University of Wisconsin-Madison economist who specializes in poverty. "As a whole, the safety net is holding many people up, while California is struggling more because it's relatively harder there to qualify for food stamps and other benefits."

Broken down by group, poverty was disproportionately affecting people 65 and older — about 15.1 percent, or nearly double the 8.7 percent rate calculated under the official formula. They also have higher medical expenses, such as Medicare premiums, deductibles and drug costs, that aren't factored into the official rate.

Working-age adults ages 18-64 saw an increase in poverty from 13.7 percent to 15.5 percent, due mostly to commuting and child care costs.

In contrast, the new measure showed declines in poverty for children, from 22.3 percent under the official formula to 18.1 percent. Still, they remained the age group most likely to be economically struggling by any measure.

Hispanics and Asians also saw much higher rates of poverty, 28 percent and 16.9 percent, respectively, compared with rates of 25.4 percent and 12.3 percent under the official formula. Their poverty levels rose after the government took into account safety-net programs such as food stamps and housing, which have lower participation among immigrants and non-English speakers.

In contrast, African-Americans saw a modest decrease in poverty, from 27.8 percent under the official rate to 25.7 percent based on the revised numbers. Among non-Hispanic whites, poverty rose from 9.9 percent to 11 percent.

Economists long have criticized the official poverty rate as inadequate. Based on a half-century-old government formula, the official rate continues to assume the average family spends one-third of its income on food. Those costs have actually shrunk to a much smaller share, more like one-seventh.

The official formula also fails to account for other expenses such as out-of-pocket medical care, child care and commuting, and it does not consider noncash government aid, such as food stamps and tax credits, when calculating income.

In reaction to some of the criticism, the government in 2010 asked the Census Bureau to develop a new measure, based partly on recommendations made by the National Academy of Sciences. It released national numbers based on that formula for the first time last year. This year's release features a 50-state breakdown on poverty, prompted in part by local officials such as New York City Mayor Michael Bloomberg who have argued that the official measure does not take into account urban costs of living and that larger cities may get less federal money as a result.

The goal is to help lawmakers to better gauge the effectiveness of anti-poverty programs, although it does not replace the Census Bureau's official poverty formula.

Among the findings:

-If it weren't for Social Security payments, the poverty rate would rise to 54.1 percent for people 65 and older and 24.4 percent for all age groups.

-Without refundable tax credits such as the earned income tax credit, child poverty would rise from 18.1 percent to 24.4 percent.

"These figures are timely given the looming expiration of two key measures that account for part of these programs' large antipoverty impact: federal emergency unemployment insurance and improvements in refundable tax credits" such as the Earned Income Tax Credit, said Arloc Sherman, a senior researcher at the Center for Budget and Policy Priorities, a liberal-leaning think-tank. "Letting these measures expire at year's end could push large numbers of families into poverty."

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